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Exam 7: Sarbanes-Oxley, Internal Control, and Cash

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Question 51

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On April 2nd, Granger Sales decides to establish a $125.00 Petty Cash Account to relieve the burden on Accounting. (a) Journalize this event. (b) On April 10th, the petty cash fund has receipts for mail and postage of $43.50, contributions and donations of $29.50, meals and entertainment of $38.25 and $13.55 in cash. Journalize the replenishment of the fund. (c) On April 11th, Granger Sales decides to increase petty cash to $200.00. Journalize this event.

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Question 52

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In the normal operation of business you receive a check from a customer and deposit it into your checking account. With your bank statement you are advised that this check for $775 is "NSF". The bank also informs you that due to the amount of activity on your business account the monthly service charge is $75. During a bank reconciliation, you will:

A) subtract both values from balance according to bank.
B) add both values from balance according to books.
C) add both values from balance according to bank.
D) subtract both values from balance according to books.

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Question 53

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The notification accompanying a check that indicates the specific invoice being paid is called a

Harris Company had checks outstanding totaling $15,400 on its May bank reconciliation. In June, Harris Company issued checks totaling $64,900. The June bank statement shows that $47,600 in checks cleared the bank in June. A check from one of Harris Company's customers in the amount of $300 was also returned marked "NSF." The amount of outstanding checks on Harris Company's June bank reconciliation should be

Receipts from cash sales of $3,200 were recorded incorrectly in the cash receipts journal as $2,300. What entry is required in the company's accounts?

Which one of the following below is not a factor that influences a business's control environment?

Using the following information, prepare a bank reconciliation for Cole Co. for May 31, 2011:

Cash equivalents

Which one of the following below reflects a weak internal control system?

The Sarbanes-Oxley Act of 2002 was passed by Congress due to the public outcry after the financial scandals of the early 2000s.

The control environment in an internal control structure is the attitude and awareness of internal control by all employees.

The Sarbanes-Oxley Act requires that financial statements of all public companies report on management's conclusions about the effectiveness of the company's internal control procedures.

Derek Company gathered the following reconciling information in preparing its September bank reconciliation:

The bank statement for Gatlin Co. indicates a balance of $7,735.00 on June 30, 2010. After the journals for June had been posted, the cash account had a balance of $4,098.00. Record the appropriate journal entries that would be necessary for Gatlin Co.

Accompanying the bank statement was a credit memo for a short-term note collected by the bank for the customer. What entry is required in the company's accounts?

Green Valley Bank sent Comstock Industries their end of month bank statement for July. The end of month balance by the bank is $11,237.00. The statement shows that a deposit for $4,250.00 is in transit at the end of the statement period. The statement also revealed that checks for $87.00, $105.00, and $95.00 are outstanding. Green Valley collected a 90 day, 12% interest $4,000.00 note receivable charging $20.00 for the service. No interest has been accrued on the note. The bank charges a monthly account fee of $35.00. The end of month balance per company books is $11,135.00. Complete a bank/account reconciliation and write any necessary journal entries for the reconciliation.

A minimum cash balance required by a bank is called

A firm's internal control environment is not influenced by

After a bank reconciliation is completed, adjusting entries are prepared for items in the balance per company's records as well as items in the balance per bank statement.

If the balance in Cash Short and Over at the end of a period is a credit, it should be reported as an "other income" item on the income statement.